How To Calculate PAYE On salary – A Complete Guide

This article’s primary goal is to help the reader complete a guide on calculating PAYE on your salary. 

What is PAYE

PAYE, also known as Employees Tax simply stands for Pay As You Earn. It is the amount of money deducted from an employee’s salary or salary payable by the employer. This deduction is made before the money lands in the hands of the employee or even hits their account. This process is what is called PAYE. The PAYE system has been in existence since 1914.

Why Do We Pay PAYE On Salaries In South Africa?

By using PAYE to deduct income tax from workers’ salaries in South Africa, South African Revenue Service, that is SARS, can get all the taxes due them as and when it comes rather than waiting until the end of the year to deduct income tax.

It is also to ascertain that your employer is indeed making the designated income tax they deduct from their employees.

Who Must Pay PAYE In South Africa?

It is to be paid by any establishment that has employed more than one person. First and foremost, the establishment must register with the South African Revenue Service. They must register as Pay As You Earn and Standard Income Tax on Employees.

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Also, lots of people pay their taxes through Pay As You Earn. This is the system most people have employed to pay their income tax.

How Much Must I Earn To Pay PAYE South Africa?

People who are below 65 years old ought to pay R87, 300. Those above 65 but below 75 years old will have to pay R135 150. And those who are 75 years old will be expected to pay R151, 100. 

What Is The Minimum Salary For PAYE In South Africa?

If an employee earns less than R6 312.50 in a month, then it is not required of that employee to pay PAYE every month. You will equally not be required to pay any income tax at the end of the year.

Is PAYE Compulsory In South Africa?

If you have a company that employs people to work for you, the law demands that you pay. The company has to register with the South African Revenue Service for PAYE. Some consequences will befall any company that goes contrary to this.

What Happens If My Employer Doesn’t Pay?

Per the South African Act Section 234 (p), of the Tax Administration Act, if an employer with no provocation at all decides not to pay Pay As You Earn as registered with SARS, that employer is guilty of not adhering to the Tax Administration Act. As such, they will be fined or will be imprisoned. However, that imprisonment will not be more than two years.

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Who Is Responsible For Pay PAYE In South Africa?

The onus is on the employer to pay on behalf of the employee. This deduction is made before their pay hits their account.

How To Register For Paye On eFiling/ PAYE Login?

You can register for PAYE online. To do that, kindly follow these basic steps;

  • First and foremost, click on this link to direct you to the SARS eFiling page
  • Click on Home, where you will find SARS registered details functionality
  • Proceed by clicking on SARS registered details
  • Then select the payrolls taxes menu
  • Click on add new product
  • Tick on the PAYE new registration
  • Then select ok after all the selections are made

How Is PAYE Calculate In South Africa?

To calculate PAYE, the employer must multiply the employee’s taxable earnings, which may include all other fringe benefits, by either 52 weeks, 26 weeks, or 12 months. This is dependent on how often that employee gets paid to get their annual amount.

It also includes basic salaries, bonuses, and allowances.

PAYE How To Calculate – Step-To-Step (Paye Calculator)

  • First, you have to calculate your annual gross income. 

For Fixed Salary, use this formula- Employee’s gross annual salary= monthly salary X 12

For Variable Salary, use this formula- Employee gross annual salary = sum of the monthly wage to the current date/number of salary months) X 12

For instance, if Alex received R20,000 in September, R17,000 in October, and R12,000 in November, the November salary, which is R12,000, will be the current month of PAYE calculation, and the gross annual earnings will be;

Employee gross annual salary = ((R20,000+R17,000+R12,000)/3)*12

  • For regular deductions such as provident funds, use this formula

Deductions= (Sum of monthly RAF, pension etc.)*12

What Percentage Is PAYE In South Africa?

Here is the percentage rate.

1 – 226 000

18% of taxable income

226 001 – 353 100

40 680 + 26% of taxable income above 226 000

353 101 – 488 700

73 726 + 31% of taxable income above 353 100

488 701– 641 400

115 762 + 36% of taxable income above 488 700

641 401 – 817 600

170 734 + 39% of taxable income above 641 400

817 601 – 1 731 600

239 452 + 41% of taxable income above 817 600

1 731 601 and above

614 192 + 45% of taxable income above 1 731 600

Do Foreigners Pay PAYE In South Africa

According to the news, only resident employers are obligated to pay PAYE. However, if you are a non-resident, you must pay tax on your earnings or income earned in South Africa.

Is PAYE Calculated On Gross Or Net Salary In South Africa?

According to the Income Tax Act of 1961, PAYE is only levied on net income, not gross income. 

PAYE Payment Date South Africa

Pay As You Earn must be paid within seven days following the end of the month. This is when the deductions are often made. It should be paid by the 22nd of the subsequent tax month if the salaries are paid monthly.

Employees will pay a penalty that does not exceed 10% if they fail to pay their Pay As You Earn on time.

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